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BoJ’s Ueda signals no rush to hike rates amid global uncertainties

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    ActionForex.com
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    In a speech today, BoJ Governor emphasized that the central bank will need to thoroughly assess factors such as financial and capital market developments both domestically and internationally, as well as the broader global economic environment. Importantly, Ueda indicated that there is “enough time” to make these evaluations, suggesting that BoJ is not in a hurry to raise interest rates again.

    Ueda reaffirmed BoJ’s commitment to adjusting its policy based on its economic and inflation outlook, stating that if the projections in the Outlook Report are met, the BoJ would indeed raise the policy interest rate. However, he also stressed the unpredictability of the current environment.

    “Given the high uncertainties surrounding economic activity and prices, unexpected situations may occur,” Ueda noted, adding that policy actions will need to be timely and flexible rather than adhering to any “fixed schedule.”

    Ueda further commented on Yen, noting that the recent one-sided depreciation has been partially retraced since August. This, along with a slowdown in the rise of import prices, has reduced the upside risk to inflation driven by higher import costs.

    Full speech of BoJ’s Ueda here.

    RBA holds rates at 4.35%, remains vigilant on inflation risks

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      ActionForex.com
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      RBA kept the cash rate target unchanged at 4.35% today, as widely anticipated by markets. The central bank stated that data since the August Statement on Monetary Policy have “reinforced the need to remain vigilant to upside risks to inflation.” Maintaining its stance of “not ruling anything in or out,” RBA emphasized its determination to return inflation to target levels and affirmed it will “do what is necessary.”

      Regarding the inflation outlook, RBA noted that headline inflation is expected to “fall further temporarily” due to federal and state cost-of-living relief measures. However, it does not foresee inflation returning sustainably to the 2–3% target range until 2026. This suggests that while short-term relief is expected, underlying inflationary pressures remain a concern over the medium term.

      Full RBA statement here.

      Japan’s PMI manufacturing dips to 49.6, services rises to 53.9

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        ActionForex.com
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        Japan’s PMI manufacturing index ticked down from 49.8 to 49.6, marking its third consecutive month in negative territory. On the other hand, services sector offered some relief as its PMI edged higher, rising from 53.7 to 53.9. Composite PMI slipped from 52.9 to 52.5, indicating a slight softening in growth momentum.

        Usamah Bhatti, Economist at S&P Global Market Intelligence, noted that Japan’s private sector expansion carried on through Q3, though at a slower pace. The expansion remained services-led, with the sector showing its strongest growth in five months, while manufacturing output fell back into contraction for the second time in three months.

        Bhatti also highlighted that input cost inflation has eased to a six-month low, with both manufacturing and services firms reporting softer cost pressures. However, service providers are increasingly passing higher costs onto customers, as output price inflation ticked up slightly in September. Confidence in the future remains positive, but the overall sentiment has weakened to its lowest level since April 2022.

        Full Japan PMI release here.

        Fed’s Goolsbee signals multiple rate cuts ahead as focus shifts to employment

          By
          ActionForex.com
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          Chicago Fed President Austan Goolsbee suggested at an event overnight that Fed will likely implement “many more rate cuts over the next year” as it shifts its focus from inflation to employment concerns.

          Goolsbee further noted that a proactive approach is necessary to avoid potential disruptions in the labor market. “It’s just not realistic to wait until problems show up,” he said, highlighting the need for Fed to avoid being “behind the curve” in managing economic risks.

          While the timing of the initial rate cut may be less critical, Goolsbee stressed the importance of a “longer-arc view” to ensure favorable conditions for both inflation and employment. He pointed out that “rates need to come down significantly going forward” to maintain economic stability.

          US PMI indicates 2.2% annualized GDP growth, inflation remains a concern

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            ActionForex.com
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            US PMI Manufacturing fell from 47.9 to 47.0, marking a 15-month low. PMI Services slipped slightly from 55.7 to 55.4, while Composite PMI edged down from 54.6 to 54.4, indicating continued economic growth but at a slower pace.

            Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted, “The data points to an economy growing at an annualized rate of 2.2% in the third quarter, driven by the robust service sector.”

            However, rising inflationary pressures are cause for concern, with prices charged for goods and services increasing at the fastest rate in six months. Input costs in services, particularly wages, have surged to their highest in a year.

            “FOMC may need to move cautiously in implementing further rate cuts,” Williamson added.

            Full US PMI release here.

            Fed’s Bostic justifies 50bps rate cut amid faster inflation progress, labor market weakness

              By
              ActionForex.com
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              In a speech today, Atlanta Fed President Raphael Bostic shed light on his support for last week’s 50bps rate cut, citing faster-than-expected improvements in inflation and labor market cooling.

              “Progress on inflation and the cooling of the labor market have emerged much more quickly than I imagined at the beginning of the summer,” Bostic remarked. He now sees a path to normalizing monetary policy sooner than anticipated.

              Bostic acknowledged that his “residual concern” about inflation could have led him to favor a smaller reduction. However, a 25bps cut “would belie growing uncertainty about the weakening of the labor market,” he added.

              Full speech of Fed’s Bostic here.

              Fed’s Kashkari backs 50bps cut, shifts focus to labor market weakness

                By
                ActionForex.com
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                In an essay, Minneapolis Fed President Neel Kashkari provided insight into his support for last week’s 50bps rate cut, despite not having a vote on the decision.

                “We have made substantial progress bringing inflation back down toward our 2 percent target, and the labor market has softened,” he said. Kashkari noted that the balance of risks has “shifted away from higher inflation” and toward risk of further weakening of the labor market, justifying the need for a lower federal funds rate.

                He acknowledged that even after the substantial 50bps reduction, “the overall stance of monetary policy remains tight.”

                Kashkari further pointed out that the economy’s unexpected resilience despite high policy rates might indicate a temporary or even structural rise in the neutral rate. “The longer this economic resilience continues, the more signal I take that the temporary elevation of the neutral rate might in fact be more structural,” he explained.

                Looking ahead, Kashkari highlighted that future policy decisions would depend on incoming data related to economic activity, labor markets, and inflation.

                Full essay of Fed’s Kashkari here.

                UK PMI composite falls slightly to 52.9, soft landing and further BoE cut in sight

                  By
                  ActionForex.com
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                  UK’s economic growth showed signs of moderation in September, with PMI Manufacturing slipping from 52.5 to 51.5, while PMI Services declined from 53.7 to 52.8. Consequently, PMI Composite also dropped to 52.9 from 53.8, indicating a slight deceleration in overall activity.

                  Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted that the data brings “encouraging news,” pointing to robust economic growth alongside a cooling in inflationary pressures. He highlighted that the UK economy appears to be heading for a “soft landing” as inflation seems to be easing without the need for further significant rate hikes by BoE.

                  While output growth slowed in both manufacturing and services, Williamson downplayed concerns, stating that the survey data is still consistent with GDP growth of around 0.3% in Q3, aligning with BoE forecasts. The cooling in services inflation, now at its lowest level since February 2021, is particularly notable. This progress brings the BoE’s 2% inflation target closer within reach and supports the possibility of further rate cuts before the end of 2024.

                  Full UK PMI release here.

                  Eurozone PMI composite falls to 48.9, Oct ECB rate cut on the table

                    By
                    ActionForex.com
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                    Eurozone economic activity showed further signs of weakness in September as both manufacturing and services sectors struggled. PMI Manufacturing Index dropped from 45.8 to 44.8, a nine-month low, while PMI Services fell from 52.9 to 50.5, a seven-month low. As a result, PMI Composite slid back into contraction, dropping farm 51.0 to 48.9—its lowest in eight months.

                    Cyrus de la Rubia, Chief Economist at HCOB expressed growing concerns that Eurozone is “heading towards stagnation.” The decline in the Composite PMI in September marked the largest drop in 15 months. This weakening momentum is particularly worrying as both new orders and order backlogs are rapidly decreasing, signaling that further economic deterioration is likely.

                    The manufacturing sector, in particular, is in a prolonged slump, with the recession now stretching into its 27th consecutive month. Job cuts in the manufacturing sector have accelerated, with layoffs occurring at the fastest pace since August 2020. Even the services sector, which had been a bright spot for growth, is now showing signs of cooling, with employment growth nearly flat for the fourth straight month.

                    Input and output price inflation have eased, particularly in the services sector. With ongoing economic contraction, the possibility of a rate cut in October is “”very well be on the table”, de la Rubia noted.

                    Full Eurozone PMI release here.

                    Germany’s PMI composite falls to 47.2, recession baked in

                      By
                      ActionForex.com
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                      Germany’s economic outlook has worsened with the latest PMI data showing continued weakness in both manufacturing and services. PMI Manufacturing fell  from 42.4 to 40.3 in September, marking a 12-month low. PMI Services dropped to from 51.2 to 50.6, a six-month low. PMI Composite PMI declined from 48.4 to 47.2, a seven-month low.

                      Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, commented on the deepening downturn in the manufacturing sector, saying, “The hope for an early recovery has evaporated,” as output plunged at its fastest rate in a year, with new orders collapsing. The sector’s troubles have prompted significant layoffs, with several major automotive suppliers announcing job cuts.

                      These concerning trends in manufacturing are now beginning to affect Germany’s traditionally robust services sector. De la Rubia warned that activity growth among service providers has slowed for four consecutive months, edging toward stagnation.

                      A technical recession appears to be “baked in”. According to HCOB’s Nowcast, Germany’s economy is expected to shrink by -0.2% in Q3, following a -0.1% contraction in Q2.

                      Full Germany PMI release here.

                      France PMI composite tumbles to 47.4 as Olympics related anomaly dissipates

                        By
                        ActionForex.com
                        -

                        France’s economy took a sharp downturn in September as PMI Services dropped significantly from 55.0 to 48.3, marking a six-month low. The broader PMI Composite also fell from 53.1 to 47.4, an eight-month low, signaling a shift back to contraction. While PMI Manufacturing saw a slight uptick from 43.9 to 44.0, it remains in contractionary territory.

                        According to Tariq Kamal Chaudhry, economist at Hamburg Commercial Bank, the strong growth seen in August was short-lived, with the surge largely driven by “an Olympics-related anomaly” that has since dissipated. He noted that the situation in manufacturing continues to struggle, much like in previous months.

                        Chaudhry pointed out that their Nowcast predicts “near stagnation” for the French economy in Q3, aligning France with other Eurozone economies facing significant growth challenges.

                        Full France PMI release here.

                        Australian PMI manufacturing hits 52-month low, composite in contraction

                          By
                          ActionForex.com
                          -

                          Australia’s economic activity continued to slow in September, with the Judo Bank Manufacturing PMI dropping to 46.7, its lowest in 52 months, down from 48.5 in August. The Services PMI also declined, slipping to 50.6 from 52.5, while the Composite PMI fell back into contraction, down from 51.7 to 49.8, marking an 8-month low.

                          Matthew De Pasquale, Economist at Judo Bank, noted that the recent PMI weakness suggests households are saving more of the government stimulus than anticipated. He added that “the economy is gradually bringing supply and demand into balance,” supporting the case for maintaining the current cash rate rather than hiking it later this year.

                          Employment growth also showed signs of slowing, with the employment index barely in expansion at 50.8. Additionally, output price index, which tracks businesses raising consumer prices, hit its lowest level since January 2021. Although input prices dropped, they remain above pre-pandemic averages, signaling lingering inflationary pressures.

                          Full Australia PMI release here.

                          New Zealand’s exports fell -0.1% yoy in Aug, imports down -1.0% yoy

                            By
                            ActionForex.com
                            -

                            New Zealand’s goods trade balance posted deficit of NZD -2.2B, substantially larger than the expected deficit of NZD -155m. This widening gap is attributed to a slight decrease in both goods exports and imports. Goods exports fell by NZD -6.1m, or 0.1% yoy, to NZD 5.0B, while goods imports decreased by NZD -70m, or -1.0% yoy, to NZD 7.2B.

                            The decline in exports was primarily due to weaker trade with China, New Zealand’s largest trading partner. Exports to China fell by NZD -195m, or 16% yoy. In contrast, exports to other key markets saw gains. Shipments to Japan jumped by 39% yoy, while exports to the US and the EU rose by 3.1% yoy and 5.9% yoy, respectively.

                            On the import side, China, the EU, and Australia all saw notable declines in the value of goods imported by New Zealand, with China down -6.4% yoy, the EU down -8.2% yoy, and Australia down -12% yoy. However, imports from the US and South Korea surged. Goods from the US increased by NZD 154m (24% yoy), and imports from South Korea were up by a substantial NZD 185m (39% yoy).

                            Full NZ trade balance release here.

                            Canada’s retail sales rises 0.9% mom, 7 of 9 subsectors grow

                              By
                              ActionForex.com
                              -

                              Canada’s retail sales rose 0.9% mom to CAD 66.4B in July, well above expectation of 0.5% mom. Sales were up in seven of nine subsectors, led by increases at motor vehicle and parts dealers. In volume terms, sales were also up 1.0% mom.

                              Advance estimate suggests that sales increased 0.5% mom in August.

                              Full Canada retail sales release here.

                              BoE’s Mann favors extended tight policy before swift, aggressive cuts

                                By
                                ActionForex.com
                                -

                                In a speech today, BoE MPC member Catherine Mann emphasized the importance of a cautious approach to easing monetary policy, stating that it’s preferable to remain restrictive longer amid inflation uncertainties.

                                She argued that “a risk management assessment implies it is better, under inflation uncertainty, to remain restrictive for longer, until right tail risks to the inflation process dissipate, and then to cut more aggressively.”

                                This “more activist strategy”, according to her, would allow for a sustainable inflation outcome with less impact on the economy, as she mentioned it helps achieve the target “at a lower sacrifice ratio.”

                                Despite agreeing with the majority of the MPC members on holding rates steady in the latest meeting, Mann has expressed a “guarded view” on starting the cutting cycle. Having voted against the 25bps rate cut in August, Mann again voted to hold yesterday.

                                Full speech of BoE’s Mann here.

                                ECB’s de Guindos keeps all option open data will drive future rate cuts

                                  By
                                  ActionForex.com
                                  -

                                  In an interview with Expresso, ECB Vice President Luis de Guindos reaffirmed the central bank’s cautious approach regarding rate cuts in the upcoming meetings. He stressed that ECB remains “fully committed” to a data-dependent strategy, making decisions on a “meeting-by-meeting” basis.

                                  While he acknowledged the possibility of cuts in both October and December, De Guindos highlighted that December would provide a clearer picture. “We will have more information and a new round of projections,” he noted.

                                  Nevertheless, he emphasized ECB plans to keep “all options open” to retain flexibility, with future moves hinging entirely on evolving economic data.

                                  UK retail sales grows 1% mom in Aug, annual growth highest since Feb 2022

                                    By
                                    ActionForex.com
                                    -

                                    UK retail sales volumes surged 1.0% mom in August, significantly outpacing the expected 0.3% mom growth. This marked the highest sales index level since July 2022. Over the broader three-month period ending in August, sales volumes increased by 1.2% compared to the previous three months.

                                    On an annual basis, sales volumes jumped 2.5% yoy, marking the largest annual rise since February 2022. However, despite these strong gains, retail sales volumes remain -0.4% below their pre-pandemic levels from February 2020.

                                    Full UK retail sales release here.

                                    BoJ stands pat at 0.25%, sees gradual inflation rise and economic growth

                                      By
                                      ActionForex.com
                                      -

                                      BoJ left its uncollateralized overnight call rate unchanged at around 0.25% during today’s meeting, as widely anticipated and decided by unanimously.

                                      In the accompanying statement, BoJ maintained a positive outlook for the Japanese economy, projecting continued growth at a rate above its potential. The central bank expects “overseas economies will continue to grow moderately,” further supporting Japan’s economic expansion. Domestically, the “virtuous cycle from income to spending” will gradually intensify, aided by accommodating financial conditions.

                                      On the inflation front, core CPI is forecast to rise through fiscal 2025. BoJ also noted that underlying inflation will “increase gradually” as output gap narrows and medium- to long-term inflation expectations firm up.

                                      However, the central bank also outlined several risks to its outlook, including global economic developments, commodity prices, and the pace at which firms adjust wage and price setting.

                                      Full BoJ statement here.

                                      Japan’s CPI core rises to 2.8% in Aug, core-core up to 2.0%

                                        By
                                        ActionForex.com
                                        -

                                        Japan’s core CPI, excluding fresh food, rose to 2.8% yoy in August, matching expectations and marking the fourth consecutive month of acceleration. This increase is up from 2.7% yoy in July and continues the upward trend from 2.2% yoy in April, keeping inflation above BoJ’s 2% target since April 2022.

                                        Core-core CPI, which strips out both fresh food and energy, also rose from 1.9% yoy to 2.0% yoy, highlighting broader inflationary pressures in Japan. Headline CPI, which includes all categories, increased from 2.8% yoy to 3.0% yoy.

                                        Energy prices surged 12.0% yoy, while food prices increased by 2.9% yoy, and household durable goods saw a significant rise of 7.7% yoy. These numbers indicate persistent inflationary pressures across a wide range of goods and services.

                                        UK Gfk consumer confidence plummets to -20 ahead of expected painful budget

                                          By
                                          ActionForex.com
                                          -

                                          UK GfK Consumer Confidence dropped sharply in September, falling from -13 to -20, marking the biggest decline since April 2022. The seven-point drop reflects growing concerns about the economic outlook and personal finances, with households bracing for a difficult budget next month.

                                          Key forward-looking indicators worsened significantly. Expectations for the general economy over the next 12 months dropped by -12 points to -27, while personal finance expectations fell by -9 points to -3. The major purchase index, which gauges consumers’ willingness to buy big-ticket items, also dropped -10 points to -23.

                                          GfK noted, “Despite stable inflation and the prospect of further rate cuts, this is not encouraging news for the UK’s new government.” Neil Bellamy, Consumer Insights Director at GfK, linked the drop to concerns over Prime Minister Keir Starmer’s warnings of a “painful” budget. Bellamy said, “Consumers are nervously awaiting the Budget decisions on Oct. 30 after the withdrawal of winter fuel payments and warnings of further difficult measures.”

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